Property prices in Australian cities falling, latest data shows
06-06-2012
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The RP Data-Rismark May Home Value Index shows that values have continued to slide with the latest drop bringing the cumulative decline to 2.2% over the first five months of 2012. Overall values are down 5.3% over the past twelve months.
The May value falls were spread across every capital city apart from Adelaide where dwelling values bucked the trend, increasing by 1.2%. Melbourne recorded the weakest market conditions over the month with values down 2.7%.
Much of the weakness is confined to the detached housing market rather than apartments, according to RP Data’s research director Tim Lawless.
‘It is clear that the market is becoming increasingly price point driven. Unit values across the combined capitals increased in May and they are up by 1.3% over the first five months of the year. Based on median prices, unit prices are generally around 15 to 20% lower than house prices. Investment yields also tend to be higher and units are often located more strategically compared with their detached counterparts,’ Lawless said.
The stronger performance across more affordable markets is also evident in the results from the RP Data-Rismark Stratified Hedonic Home Value Index. This index provides a summary of how dwelling values have changed across the most expensive 20% of capital city suburbs, the middle 60% of suburbs and the most affordable 20% of suburbs.
Premium dwelling values have fallen by 6.1% over the twelve months ending in April 2012 while dwelling values at the affordable end of the spectrum are down by just 1.5%.
According to Rismark managing director Ben Skilbeck, one positive to take away from the soft housing market is that housing affordability is showing a marked improvement.
‘The combination of interest rate reductions, declining home values and disposable income growth has significantly improved affordability. Since dwelling values peaked in November 2010, they are down by 7.6%, the RBA cash rate has fallen from 4.75% to 3.75% and disposable income per household has increased by over 5 per cent,’ he said.
Rental yields are also showing some improvement, not just on the back of lower home values but also higher rents. Lawless points out that rental yields are continuing to shift higher.
‘Rental yields are higher now compared to a year ago across every capital city. In some cities where rents have increased meaningfully such as Darwin and Perth, gross rental yields have improved by 50 basis points or more,’ he said.
According to Lawless, other housing market indicators are showing some positive signs that conditions might move towards stability. Each of the key vendor metrics we analyse have improved over the month. Vendor discounting has reduced from a peak of -7.9% to -7.1% which suggests that vendors are becoming more realistic about price expectations on their home.
The average number of days it takes to sell a property has also fallen from the seasonal highs recorded earlier this year. The typical capital city house is now taking 63 days to sell compared with 70 days last month. Auction clearance rates have also levelled around the 50% mark compared with an average of about 45% throughout the second half of 2011.
Skilbeck believes that weak consumer sentiment appears to remain a barrier to the recovery in values. ‘Despite what appears to be a positive economic picture here in Australia, with unemployment below 5%, solid population growth and below average mortgage rates, the Westpac Melbourne Institute Index of Consumer Sentiment remains 6.3% below its long term average. Concurrently, new mortgage finance commitments aren’t moving a great deal suggesting we are yet to see heightened buyer activity return to the market,’ he explained.
Another hurdle for the property market is the large number of properties currently being advertised for sale. Based on RP Data estimates, there were approximately 308,500 homes advertised for sale across Australia during May which is almost 9% more than at this time last year.
While stock levels have reduced since the latter part of 2011, Lawless said that this result still represents a larger than normal pool of homes available for sale at a time when transaction volumes are running well below their five year average.
